Britain’s slogan: I did it May way

David Marsh, OMFIF managing director, gave an interview to German news magazine Der Spiegel. The following is an English translation.

SPIEGEL: Mr. Marsh, did you vote to leave the EU?

Marsh: No, I voted to stay. I did though do something unusual for me: I placed a £200 bet on ‘leave’ with bookmaker Ladbrokes, just in case, to have a small consolation prize.

SPIEGEL: How much did you win?

Marsh: £600 – it relieved my pain a little.

SPIEGEL: It is now five weeks since the referendum, and many expected an economic crash. So far, however, this has not happened. Were the concerns exaggerated?

Marsh: I think so. We have a period of uncertainty and companies may invest less. But in 20 years it is unlikely we will say that this referendum has led to a disastrous outcome. It may even offer opportunities.

SPIEGEL: What do you mean?

Marsh: The pound has fallen. This weakness will help our exports, British products will be cheaper abroad. And this attracts foreign investors, as seen with Japan’s Softbank taking over High-tech ARM for €29bn.

SPIEGEL: Such a coup is hardly what Leavers wished – to have foreigners take control of the economy?

Marsh: Oscar Wilde once wrote that people know the price of everything and the value of nothing. It's nothing special for the British if everything is for sale. We have fewer sensitivities here than the Germans.

SPIEGEL: But will the British be so relaxed about their flagship industry – financial services? Some here fear a veritable exodus.

Marsh: There are certainly some sectors that are particularly affected, for example the settlement of euro transactions. But computers can carry out a lot of this already. It could also lead to the relocation of some foreign exchange trading or investment banking, but not in a large way. Over 700,000 people work in the London financial sector, at the most 10% will be influenced by the Brexit vote.

SPIEGEL: But the banks may lose the EU passport necessary for distributing their products in Europe.

Marsh: The big houses already have bases in Frankfurt, Dublin or Paris. You can use these centres, which does not require much effort.

SPIEGEL: Many European financial centres are trying to attract business from London. The Hesse economic minister will go there in August and lobby for Frankfurt.

Marsh: The Parisians were already here. Competition here is good for business. There it is not just one, but 10 rivals – that may help London. The City can operate the classic British game, the balance of power, playing off rivals against each other.

SPIEGEL: Frankfurt’s hopes are premature?

Marsh: Frankfurt will not transform itself overnight into a major international financial centre. Frankfurt and London could complement each other. Frankfurt could focus on financing EU industry, and London could take the global operations.

SPIEGEL: This week, shareholders have agreed the Frankfurt-London stock exchange merger. Is it realistic to have the HQ in the UK?

Marsh: It wouldn’t be very clever to have the legal seat of the company in London. Maybe they could find another place, maybe Amsterdam or Dublin.

SPIEGEL: The European Banking Authority would probably pull out of London.

Marsh: That would be a setback for the City. But we expect there’ll be another two and a half years before Britain leaves the EU. A lot can happen. European politicians’ ability to find compromises never ceases to amaze.

SPIEGEL: The UK is looking for a post-EU model. How would this look?

Marsh: It is certainly not like the Swiss model, nor Albanian, nor Greenlandic. I hope this doesn’t sound nationalistic – it should be a British way. There is a tendency in Germany to think that the British always want special treatment – and that is true: We want special treatment.

SPIEGEL: And what does this consist of?

Marsh: We need to manage a compromise between our expectations and the EU’s: we will still pay into the EU budget, but significantly less. We will control immigration more rigorously. And we want to maintain access to the EU internal market.

SPIEGEL: Do you really think Europe will allow this? If so, then EU critics in the Netherlands or Austria will wish to emulate this British model and leave the EU.

Marsh: That’s right; the EU can’t be too generous to Britain. On the other hand we have time on our side. Britain will probably not have a general election until 2020, while the German, Dutch and French will all go to the polls next year. Prime Minister Theresa May has time to develop Britain’s European position. She can build on the UK’s special status outside the euro area, where we are one of the largest trading partners. We will find a form of British exceptionalism. Frank Sinatra’s ‘I Did It My Way’ may become for the UK, ‘We did it May way’.

SPIEGEL: What might this ‘May way’ look like? Will the UK turn itself into a low-tax paradise with minimum regulation?

Marsh: We will certainly not become a European version of the Cayman Islands, we cannot afford that. Banking regulation should be at least as strict as the EU. The financial crisis has taught us that less regulation leads to poorer results.

SPIEGEL: There are a lot of similarities between the prime minister and Chancellor Angela Merkel, this was obvious when May visited Merkel last week in Berlin: similar age, similar origin, similarly pragmatic. Does that help British negotiations?

Marsh: There is good chemistry between the two. You can talk of 'Angela May and Theresa Merkel' as Europe's new tandem. Yet the chancellor faces the tough task. Her room for manoeuvre is narrowing, the more she faces Europe’s economic problems: the debt issues in Greece, the banking crisis in Italy, the monetary policy of the European Central Bank.

SPIEGEL: What should she do?

Marsh: She is in a dilemma. Merkel’s supporters may desert her if she’s too conciliatory. But then the Germans cannot always say No if it comes to aid for countries in crisis or softening the Maastricht criteria. They don’t have the strength.

SPIEGEL: Who will suffer most from Brexit: the UK or the rest of Europe?

Marsh: The British face a short, sharp shock that will subside relatively quickly. In continental Europe, the process will last longer and be more painful. Although I voted against leaving the EU, I see Britain’s s future more optimistically than that of the rest of Europe. Yet if Germany and the UK formed an alliance, both would have it easier.